RPM Reports Record Sales and Net Income for Fiscal 2008 Third Quarter, Nine Months

Published on 2008-04-08. Author :
SpecialChem

MEDINA, Ohio -- RPM International Inc. has reported
record fiscal third-quarter sales, net income and diluted earnings per
share for the quarter ended February 29, 2008. Sales and earnings momentum
in the company's larger industrial segment continued, while consumer segment
sales and earnings increased significantly over the third quarter a year
ago.

Third-Quarter Results

RPM's net sales of $731.8 million were up 7.7% from the $679.5 million
reported in the fiscal 2007 third quarter. Organic sales growth accounted
for 7.1% of the increase, with 3.2% of that amount representing net foreign
exchange gains. Net acquisition growth was 0.6% of the 7.7% total growth
in net sales.

Net income for the quarter increased 20.9% to $12.2 million, compared
to $10.1 million a year ago, while diluted earnings per share increased
25.0% to $0.10, compared to $0.08 in the year-ago third quarter.

The effective tax rate for this quarter was 22.2% compared to a tax rate
of 11.6% in the prior year. The higher effective income tax rate in the
current period is primarily due to the absence of a one-time benefit reflected
in the third quarter of last year.

"RPM's third-quarter operating results reflected continued robust
industrial demand, particularly in European, Canadian and Latin American
markets," stated Frank C. Sullivan, president and chief executive
officer. "Despite the tough U.S. housing market and domestic economy,
our consumer segment performed well, as we benefited from prior-year acquisitions,
along with the introduction of new, higher-end products, which drove market
share gains at major retail accounts," he stated.

Consolidated earnings before interest and taxes (EBIT) reached $25.1
million, an 11.4% improvement over the $22.5 million reported a year ago.

Third-Quarter Segment Sales and Earnings

The company's industrial segment posted a 9.7% sales increase to $467.1
million from $425.7 million in the year-ago third quarter. Organic sales
increased 7.5%, of which 4.1% resulted from net foreign exchange gains.
Acquisitions accounted for the remaining 2.2% of the increase in total
revenues for the period. Industrial segment EBIT for the third quarter
was essentially flat at $18.0 million for the quarter compared to $18.1
million last year. Revenue growth outpaced earnings in the current period
due to the EBIT impact of the settlement of a lawsuit by one of RPM's
subsidiaries.

"Industrial segment sales growth was led by industrial and commercial
flooring, industrial coatings and most international operations,"
stated Sullivan. "Much of this growth resulted from ongoing industrial
and commercial maintenance and improvement activities. There was also
a slight increase in new construction abroad in our principal markets,
which contributed to increased revenues in the current period. In order
to offset overall economic weakness, which is beginning to impact certain
sectors of our domestic construction markets, we will continue to secure
new business through our strong brand offerings, coupled with international
expansion and high value-added product innovations that enhance performance,"
Sullivan stated.

Sales by RPM's consumer segment increased 4.3% to $264.7 million from
$253.8 million a year ago. Of the growth in sales, 6.3% was organic, including
1.7% in net foreign exchange gains. Offsetting the organic growth in this
segment was the impact of the divestiture of the company's Bondo subsidiary
last quarter. Segment EBIT grew 17.6% to $19.8 million from $16.9 million
in the fiscal 2007 third quarter.

"Sales of small project paints and primer-sealers were up significantly
during the quarter, offset partially by relatively slower sales of caulks
and sealants, which are more dependent on new housing construction in
the U.S.," Sullivan stated. "By effectively leveraging this
continued growth in sales and combining that leverage with additional
productivity improvements, the consumer segment produced considerable
growth in EBIT over the 2007 third- quarter performance. Additionally,
we continue to benefit from the stable growth supplied by our various
repair and maintenance products."

Asbestos Update

During the quarter, RPM paid $18.7 million in pre-tax asbestos-related
indemnity and defense costs, compared to payments of $18.2 million made
during last year's third fiscal quarter. The total asbestos liability
balance stood at $286.7 million at February 29, 2008.

$250 Million, Ten-Year Note Offering

As previously announced on February 14, 2008, RPM sold $250 million of
6.50% Notes due 2018. Proceeds were used to repay, redeem or refinance
$100 million in principal amount of the company's unsecured, senior notes
due March 1, 2008, $125 million in principal amount outstanding under
RPM's accounts receivable securitization program and $19 million in principal
amount of short-term borrowings outstanding under the company's revolving
credit facility. "We are pleased with the impact of this new financing
on our liquidity and the maturity schedule of our outstanding debt. This
timely refinancing further strengthens our balance sheet, which is especially
important given the unsettled state of the economy. Furthermore, this
transaction provides additional liquidity to drive organic growth and
support our solid pipeline of acquisition opportunities," stated
Sullivan.

Nine-Month Sales and Earnings

Sales, net income and earnings per share were all records for the fiscal
nine-month period ended February 29, 2008.

RPM's net sales for the first nine months of fiscal 2008 were up 10.1%,
to $2.6 billion from $2.3 billion a year ago. Organic sales growth was
7.9%, including 2.9% in net foreign exchange gains, while net acquisitions
accounted for 2.2% of the total increase in net sales. Net income for
the first nine months was $135.3 million, up 8.8% from the $124.3 million
reported in the comparable period of fiscal 2007. Diluted earnings per
share for the period increased 7.1%, to $1.06 from $0.99 a year ago.

The first nine months of fiscal 2007 included a $15.0 million, pre-tax
gain from the settlement of asbestos-related claims against an insurance
carrier. Excluding this gain, net income for the first nine months of
fiscal 2008 increased 18.0% on a pro forma basis, from $114.6 million
in fiscal 2007, and diluted earnings per share improved 16.5% on a pro
forma basis, from $0.91 during the same period.

Nine-month EBIT was $231.0 million, up 4.3% from the $221.4 million reported
a year ago. Excluding the 2007 asbestos-related gain, EBIT increased 11.9%
on a pro forma basis, from $206.4 million last year.

RPM's industrial segment sales grew 12.1% in the first nine months of
fiscal 2008, to $1.7 billion from $1.5 billion a year ago. Eight small
acquisitions represented 2.3% of this growth, with organic growth adding
9.8%, of which 3.7% was from foreign exchange gains. Industrial segment
EBIT increased 10.1%, to $172.3 million, from $156.4 million registered
in the first nine months of fiscal 2007.

Nine-month sales for the consumer segment were $887.7 million, a 6.5%
increase from the $833.6 million reported in the same period of fiscal
2007. Organic sales increased by 4.5%, including a foreign exchange gain
of 1.6%, while product line acquisitions contributed 2.0%. Consumer segment
EBIT increased by 9.7%, to $94.5 million in fiscal 2007 from $86.2 million
in the prior fiscal year.

Cash flow and Financial Position

For the first nine months of fiscal 2008, cash flow from operations was
$161.8 million, up 20.9% from $133.8 million a year ago. Capital expenditures
were $29.8 million, compared to depreciation of $46.2 million over the
same period. Total debt at the end of February 2008 was $1.1 billion,
compared to $988.1 million at the end of fiscal 2007, with most of the
increase due to acquisition funding and the new issuance of notes. The
company's net (of cash) debt-to-total capitalization ratio was 37.7%,
compared to 43.3% at May 31, 2007.

Total cash and short-term investments were $391.0 million at the end
of February, and the company had $429.2 million available under its credit
facilities for total liquidity of $820.2 million at February 29, 2008.
In early March, the company repaid $100.0 million in senior, unsecured
Notes due March 1, 2008.

Euclid Chemical and Tremco Close Acquisitions

Subsequent to the end of the third quarter, RPM announced two acquisitions.
On March 5, 2008, the company's Tremco illbruck subsidiary purchased Prosytec
SAS, a $39 million provider of sealants for the construction and window
assembly markets in Southern and Eastern Europe. Additionally, on March
11, RPM's Euclid Chemical subsidiary acquired Increte Systems, Inc. With
sales of $15 million, Increte is the nation's leading manufacturer of
decorative concrete systems. Both acquisitions are expected to be accretive
to earnings within one year.

Business Outlook

"Given our strong results for the quarter and first nine months
of the year, we are comfortable increasing our previous guidance of 8-10%
growth in sales and earnings to 10-12% growth in both metrics for this
fiscal year. As we complete the final quarter of our fiscal year and move
into the planning process for fiscal 2009, we will continue to closely
monitor overall economic conditions and will be especially focused on
domestic construction markets. Consistent with prior years, we will issue
guidance for fiscal 2009 when our year-end results are announced in July,"
stated Sullivan.

About RPM:

RPM International Inc., a holding company, owns subsidiaries that are
world leaders in specialty coatings and sealants serving both industrial
and consumer markets. RPM's industrial products include roofing systems,
sealants, corrosion control coatings, flooring coatings and specialty
chemicals. Industrial brands include Stonhard, Tremco, illbruck, Carboline,
Day-Glo, Euco and Dryvit. RPM's consumer products are used by professionals
and do-it-yourselfers for home maintenance and improvement, boat repair
and maintenance, and by hobbyists. Consumer brands include Zinsser, Rust-Oleum,
DAP, Varathane and Testors.

This press release contains "forward-looking statements" relating
to the business of the company. These forward-looking statements, or other
statements made by the company, are made based on management's expectations
and beliefs concerning future events impacting the company and are subject
to uncertainties and factors (including those specified below) which are
difficult to predict and, in many instances, are beyond the control of
the company. As a result, actual results of the company could differ materially
from those expressed in or implied by any such forward-looking statements.
These uncertainties and factors include (a) general economic conditions;
(b) the prices and availability of raw materials, including assorted resins
and solvents; packaging, including plastic containers; and transportation
services, including fuel surcharges; (c) continued growth in demand for
our products; (d) legal, environmental and litigation risks inherent in
our construction and chemicals businesses and risks related to the adequacy
of our insurance coverage for such matters; (e) the effect of changes
in interest rates; (f) the effect of fluctuations in currency exchange
rates upon our foreign operations; (g) the effect of non-currency risks
of investing in and conducting operations in foreign countries, including
those relating to domestic and international political, social, economic
and regulatory factors; (h) risks and uncertainties associated with our
ongoing acquisition and divestiture activities; (i) risks related to the
adequacy of our contingent liabilities, including for existing and future
asbestos-related claims; and (j) other risks detailed in our filings with
the Securities and Exchange Commission, including the risk factors set
forth in our Annual Report on Form 10-K for the year ended May 31, 2007,
as the same may be updated from time to time. RPM does not undertake any
obligation to publicly update or revise any forward-looking statements
to reflect future events, information or circumstances that arise after
the date of this release.